Home equity lines of credit are revolving credit accounts similar to a credit card that allow you to charge against the value in your home. When you borrow against an equity line of credit your payment and the interest you pay is based on your outstanding balance. If you are in need of a small amount of cash that will be paid off quickly, a home equity line of credit could save you money over other types of loans. Here are the basics you need to know about an equity line of credit.
Home equity lines of credit are an excellent source or short-term cash. They are not a good option for long term loans as these lines of credit typically come with higher interest rates than other home equity options. The following discussion will help you determine if an equity line of credit is right for your financial situation.
An equity line of credit is very much like a credit card. The revolving line of credit in this case is secured by your home just like your primary mortgage loan. The advantage of this type of loan is that the interest rate is lower than unsecured credit; however, higher than a second mortgage option. Unlike an unsecured credit card the interest from your home equity line of credit is a tax deduction on your Federal Income tax.
If you are considering a home equity line of credit as a means of borrowing against your equity, it pays to shop around from a variety of home equity lenders. Because you will pay lender fees and often closing costs for the equity line of credit, it is easy to overpay for your financing if you neglect to consider these expenses. You can learn more about your home equity line options, including costly mistakes to avoid by registering for a free mortgage guidebook.
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Louie Latour specializes in showing homeowners how to avoid common mortgage mistakes and predatory lenders. For a free copy of “Mortgage Refinancing: What You Need to Know, " which teaches strategies to find the best mortgage and save thousands of dollars in the process, visit .
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Home Equity Lines of Credit